Gunvor Expands Precious Metals Business

Energy firm Gunvor Group, known especially for crude oil, refined products, natural gas and LNG trading, is diversifying its precious metal trading activities (derivatives) to physical trading, off the back of the rally in gold prices. 

Other active areas for the company include biofuels (specifically trading the feedstocks, such as corn or sugarcane, whose juice can be fermented to produce ethanol), power and emissions trading.

USA imposes Tariffs on Gold Imports; Futures Rise

The US has slapped tariffs on gold imports targeting 1 kilogram and 100 ounce gold bars (100 ounces = 2.8 kg). A 39% rate applies to imports from Switzerland (a major refining hub). The 400 ounce gold bars (11+ kilograms) from London are less popular in the US so need to be broken down into smaller bars.

US gold futures (August 2025 expiry) on COMEX have been on a tear, trading over $3400 per troy ounce (weight tolerance 5% higher or lower). The futures also breached $3400 in late April and early May. $3400 futures price translates to a notional of 100x the price i.e. $340,000 for 100 troy ounces.

For the avoidance of doubt, the tariffs as they currently stand apply to the unit specification of the COMEX contract.

Royal Mint Announces Precious Metals Recycling Facility in South Wales

The UK's oldest company with a history of over one thousand years. the Royal Mint, found in 886 AD, has announced a modern facility in South Wales which extracts gold from Printed Circuit Boards (PCBs). Up to 4,000 tonnes of PCBs (found in TVs, laptops and mobile phones) from E-waste will be processed annually. Sean Millard, Chief Growth Office of the Royal Mint, stated the factory underpinned the company's commitment to sustainable precious metals.

Gold Orbits Around $2400 Mark, 25% up in the year ending July 2024

Gold has gained 25% in one year, shooting from 1925 on 10 July 2023 to 2384 on 8 July 2024. In five years, gold has gained 70% from a level of 1425.

Brent Reaches $70 a Barrel on US-Iran tensions

The Brent March 2020 (front month) contract reached $70 a barrel.  Front month Nymex WTI in contrast hovered at $64 a barrel (Feb 2020). Both curves were in backwardation. Gold was trading similarly high around $1580 led by the Feb contract. Gold and silver remain in contango. Stocks overall are down with oil majors bucking the trend (Shell up 1.17% in UK trading - RDSA, BP up 1.81% in US trading - NYSE:BP).

What Kinds of Volumes are Being Done on Cleared Interest Rate Swaps?

Volumes Compared by Currency

The CME Group's clearing solution for interest rate swaps is doing considerable volume.

For trade date February 26, 2016, $21.6 billion of swaps were traded, with $12.5 trillion open interest.  Dollar and Euro are trading around parity (with the Euro being slightly more valuable), so that's a 20 bn EUR equivalent trading volume.

Euro swaps traded only 5.2 billion euros worth in comparison. So the volume of USD swaps is approximately four times as large.

Swaps on GBP actually exceed USD swaps in trading volume terms, for the same day, 24 billion pounds traded, which is around $34 bn (which is about 1.5x larger).

Cleared Swaps on Different "Flavours of LIBOR"

The CME clear swaps on USD Libor, Euribor and plain old "LIBOR" (which is GBP LIBOR of course) as well as host of other currencies.

Where Are Rates At - USD Libor

Friday's level for USD Libor Overnight was 37 basis points.  1 month is 43 basis points and 3 month USD Libor is 63 bps. A daily update on USD Libor levels can be found here. 1year USD Libor is 116 basis points.

"Regular" LIBOR

Overnight is 48bps, 1 month is 50 bps, and 3 months is 59 bps. 1 year LIBOR is close to 100 bps.

Who sets the LIBOR Rates

The former BBA Libor is now known as ICE Libor following the reform of the benchmark and management by ICE Benchmark Administration.  The Wheatley Review of LIBOR in 2012 made specific recommendations for the reform of LIBOR including a change of administration.  Under a tender process led by Baroness Hogg, the NYSE Euronext came up trumps (later renamed to ICE Benchmark Administration). Both administering and making submissions to LIBOR became regulated activities from 1 April 2013 - LIBOR being the first benchmark to be regulated.

As part of their activities, ICE has a dedicated surveillance team identifying breaches of submission standards and tolerances through "a combination of alerts and pattern matching".

Other Benchmark Rates administered by ICE

The ICE Swap Rate is the new replacement for ISDAFIX effective August 2014. ICE also now administer the LBMA Gold Price.

The Greatest Volume of Swaps

Interest Rate Swaps, followed by Overnight Indexed Swaps followed by basis swaps.

Deutsche Bank CDS Spike brings Excitement Back to Credit Markets

Deutsche's 5 year subordinated CDS rose to 540 basis points while one year subordinated CDS increased to 552 basis points. This means the Deutsche subordinated CDS curve is decreasing (a pattern of reversion which started appearing in the summer of 2007 during the credit crisis).

Should you wish to trade CDS speculatively there are some electronic trading options. MarketAxess (MKTX) provides a platform for trading single name CDS, CDS indices and index options. For single name CDS, they support streaming prices and a click-and-trade model as well as RFQ model.

Banks stocks sold off and people put money into gold and yen, which is trading at 113 to the dollar, down from a high of 121 yen on the 1st February 2016. The path of gold was slightly skewed as 1st February 2016 was a day of rising gold prices with a peak of $1258 per troy ounce. So whilst gold rose in response to the bank sell-off it was nothing like the peak earlier in the month, which coincided with a sell-off in the S&P.

Gold below 1400 USD - but will CBs start buying?

Gold has dropped BELOW $1400 per troy ounce (biggest drop since 1983), dancing at the 1390 level. Sri Lanka says this is an opportunity to increase reserves. Gold has traded as high as $1921 in September 2011.

The BUNDESBANK wants its gold BACK

The German Bundesbank, second largest holder of gold in the world after the United States, has decided at least half its gold should be in its own vaults. Part of this comes with pressure from the German Precious Metals Association. Apparently, last year the U.S. Federal Reserve had refused to allow Germans to verify their gold held in US vaults (reported in Der Spiegel).